Telecom, in general is a heavily regulated sector – this is especially true with regards to India. Large sized mergers and acquisitions, profit making and growth have all happened largely due to policy based triggers. But, now it seems that the sudden convergence of different factors could bring in a large influx of MVNO players in the market. Traditionally MVNOs have functioned by
- Providing lesser prices in a monopoly, oligopoly market. They thus have acted as a deterrent against monopolizing the market to the well established players. In fact, in some of the developed EU markets, MVNOs command as much as 40% of the total market share. Graphic below:
- Leveraging their own, well established retail reach to push mobile products in the market.
- The general MVNO business model requires higher margins, higher funding and greater capex.
The recent changes in the ecosystem suggest though that 1. Lots of new players joining the CSP bandwagon
- Loss of net neutrality means that internet based giants like Google are now investing in their own infrastructure
- Players like Reliance Jio looking at the convergence of media and the dumb pipes transferring that media – CSPs
- Whatsapp has recently entered the German market as a CSP
- Even utility companies are now increasingly looking forward to working as CSPs – especially in markets where they are not monopolies.
2. Increasing revenues of CSPs operating as Quadra Play operators – providing Landline Telephony, Internet, Pay Television and Mobile.
- Quadra Play could help CSPs provide more customized plans for customers.
- Quadra Play will also help increase customer retention.
3. Increasing revenues through data and evolving of technologies to ensure sustainable last mile bandwidth
- This makes the base optical fiber networks laid down by the different CSPs extremely important and MVNOs with their asset light models could leverage the same.
While I have been recommending MVNOs since some time now, it seems that TRAI also seems to be moving on the MVNO policy for India which wasn’t in place yet. Here is a link to the McKinsey report which focuses on what drives MVNO success.